Although not specifically listed as one of my 2008 financial goals, I plan to keep a full budget and track expenses versus income. My cash or envelope budget covers part of the budget but not all of it. Many expenses are not worth controlling with a cash budget because some expenses remain relatively stable and you have little control over them.

I have been great about investing — I started my first IRA account at age 17 — but I have rarely been able to stay with a budget for long. I decided that I needed to change that to better control costs in order to meet other financial goals.

Link to budget with January results. The income lines are after taxes, benefits, and 401K deductions. Also, there are three tabs — budget, actuals, and the difference. Several of the fields have notes to help explain the values.

You will notice that there is no medical category. This is left out since medical expenses can be paid out of pre-tax dollars using my flexible spending account. Essentially, I budgeted $1,800 for medical expenses using the flexible spending account so this category will only appear if I start to run over that $1,800 this year. Considering that we had two emergency room visits in January, running over $1,800 is possible. I am also missing travel — that is a mistake. I had to put some travel expenses and a few books under “Other.”

Obvious Mistakes in My Budget

I have already found several mistakes in the budget, but I am going to keep it for now. This already shows me that I spend more than I realize.

• I already mentioned no travel/vacation budget. Stupid me — that is one of my 2008 goals!
• Home repairs and car repairs should have been split.
• Home repairs should have included more items. Typically you should budget 2-4% of the value of your home each year for repairs. I know this and thought that I could somehow spend less. Spending less though might cause you to skip necessary repairs.
• I need to budget what to do with all the left over money. It needs a purpose or else I might blow it on a vacation or electronics.

Large Budget Variances in January

I invested $5630 in the stock market in January when I only intended to invest about$2,000. Due to the large drop in the stock market, I invested earlier than intended in my Roth IRA to take advantage of the drop. I pulled money out of savings which will be replaced over the year. As I reviewed the results, I noticed that I was wrong when I said that I might not be able to fully fund my 2008 Roth IRA in 2008. It is looking very possible on the spreadsheet.

I have not confirmed the tuition expenses versus the budget so the final January numbers might change slightly with my February update.

Despite the numbers being negative for the month, I consider the January budget results very positive. Most of the overage was on tuition which is periodic and investing which came out of savings, so I did not take on any credit card debt that will not be immediately paid off. Plus, my net worth did not decline due to the posted negative cash flow.

I’ll post an update in February.

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